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Making money in a resurging market

By Staff | Mar 11, 2011

Framed by test equipment, Don Heck, director of the biofuels program at Iowa Central Community College, and Julaine Bidleman, lab manager, speak to a group touring the facility.

By LARRY KERSHNER Farm News news editor FORT DODGE — Regardless what the two dozen attendees came to hear about being profitable in the resurging biodiesel market on Tuesday, farmers and ag business people kept hearing that biodiesel is the only advanced fuel that is commercially available in the U.S. And that there are opportunities to be profitable whether they blend it, sell it or burn it. The long-titled program, Biodiesel Industry Resurgence and Current Tax Credit Programs, was hosted by Iowa Central Community College and sponsored by a quadrant of user groups — Iowa Clean Cities Coalition, Iowa Biodiesel Board, Iowa Soybean Association and the Renewable Energy Group. At issue, said Alicia Clancy, manager of corporate affairs for the REG, is that with the reinstated tax credits and incentives, “There are opportunities for blenders, co-ops and fleet managers (for burning more biodiesel) as well as advantages on contracting and spot purchases of biodiesel.” The resurgence, Clancy and other presenters said, is coming from the Renewable Fuel Standard-2 that requires major petroleum refiners to comply with blending upward to 800 million gallons of biodiesel in 2011 and 1 billion gallons in 2012. When asked if the industry can manufacture that much after a two-year slow-down, Clancy said that in 2010, the U.S. manufactured 320 million gallons, but it has a 2 billion gallon capacity. “Yes, we can do it and we are ready to be part of the independent energy solution,” Clancy said. For Bill Horan, a farmer who sits on the board of Western Iowa Energy LLC, near Carnarvan, in Southeast Sac County, said ag businesses need to understand that “Biofuels are bigger than the economy and environmental benefits. “We need to be independent of foreign oil.” To get producers and truck fleet managers to burn more biodiesel in their operations was part of the point of Tuesday’s event. It was also to help “jobbers,” those who distribute fuel to end-users, to understand the pricing structure of biodiesel and to take advantage of federal and state tax credits and other incentives in purchasing biodiesel stocks. Rod Stoulil, of Pro Co-op in Pocahontas, said he attended wanting to hear the latest industry projections for biodiesel this year. “We didn’t sell very much biodiesel last year” he said, due to the loss of the federal incentives program. But with the incentives renewed, and the Renewable Identification Number, implemented by the RFS-2 to help refiners document their compliance of blending 800 million gallons this year, he’s looking for increased sales and tax credits to pass onto his customers. He also said that he has a better understanding on how to purchase biodiesel on the open market and make the cooperative more profitable. Larry Heller, who owns Heller Implements in Dunlap, on the county line of Crawford and Harrison counties along U.S. Highway 30, said he also walked away with how to take advantage of marketing RINs when contracting biodiesel purchases. “I’m working with the state to install biodiesel and ethanol blending pumps,” Heller said. “We don’t have any around us.” He said he’ll work on helping clients to understand the lubricating benefits of biodiesel on internal engine parts. He wants to help encourage the nation to be dependent on domestic energy sources and move away from OPEC sources. According to Hoon Ge, a chemical engineer from Minnesota, the 2010 BP oil pipe explosion dumped 200 million gallons of crude in the Gulf. Although that’s a big number, he said it represents just a seven-hour supply for U.S. refining needs. “That gives you an idea of how much biodiesel we need to displace,” Hoon said. According to presenters, the actual value that day of 2 percent biodiesel was 91 cents per gallon. Using the B100 cash price of $5.06 on Tuesday at Ralston, when subtracting the $1 federal blender’s credit, minus the RIN value of $1.65 and the state tax credit of $1.50, the ending value was under $1 per gallon. Although it seems that the existing credits should driving the demand for biodiesel, REG’s Clancy said that it isn’t – yet. She added, however, that if clients demand blends of 5 percent to 20 percent, the savings are even higher because there is less No. 2 diesel in the mix. “Knowledge is power,” Clancy said. “To understand the pricing mechanism (distributors) can better leverage their position with suppliers, especially when contracting purchases.” For those small fleets who buy their fuel as needed, she said, it helps them to understand what goes on behind the scenes. “As an alternative fuel, biodiesel keeps the price down for them in the long run,” Clancy said. The symposium ended with a tour of the biodiesel testing lab at ICCC, the first certified BQ-9000 testing lab in the nation.

Contact Larry Kershner at (515) 573-2141, Ext. 453 or at kersh@farm-news.com.

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